India: how India can tropicalize the G20
India is well placed to make this a strategic priority and lead this key initiative. It has the global gravity, intellectual and technological prowess to play its rightful role at the high table in transforming the global regulatory architecture that has hitherto been the preserve of certain transatlantic nations.
The existential challenges facing humanity – climate change, public health, ethical use of
technologies such as AI and gene editing – defy all conventional boundaries and require international regulatory cooperation. New threats and “unknown” risks looming on the horizon also challenge conventional sovereign boundaries as well as sector silos. Trends such as decentralized finance and cryptocurrencies, the entry of big tech players into finance, public infrastructure such as the Unified Payment Interface (UPI), and the pervasive use of big data in finance have disrupted and changed the face of finance.
Industry silos are constantly being broken down in the digital marketplace as businesses collide and converge. Globally, the fallout and fallout has grown significantly in magnitude since the global financial crisis of 2007-2008. Given the speed and magnitude of these changes, several entrenched regulatory paradigms are no longer applicable. There is an urgent need for harmonization of regulations across all sectors, and for deepening and breadth of R&D in the development and implementation of regulations. The limits of cohesion between regulators are a source of uncertainty, cost and could have a chilling effect on innovation and business results.
Regulators must be ahead of the curve to cope with cutting-edge technologies These new challenges require a new regulatory paradigm, a regulatory architecture fit for purpose and that incorporates the perspectives of fast-growing emerging market economies.
The G20 recognizes the voice and importance of these emerging economies in the new world order. It is uniquely placed to be the forum to lead such a compelling initiative from an IIRD for greater global regulatory transformation, cohesion and cooperation. The intention of this initiative is not to remove sovereignty from existing regulatory bodies. This is an opportunity to “tropicalize” regulations and the regulatory framework. While the Bretton Woods institutions have their origins in the United States and Europe, India could be the flagship of the new regulatory architecture, of which the IIRD would be the linchpin.
IIRD would be a forum where regulators, global institutions, systemically important market participants, multilateral bodies and governments could collectively assess risks and new market opportunities. Regulatory institutions around the world demand high-quality research on topics they directly oversee and on related areas that impact national and global markets.
Some attempts at regulatory cooperation have been successful. The Dunbar Project, a collaborative effort between the Monetary Authority of Singapore, the Reserve Bank of Australia, Bank Negara Malaysia and the South African Reserve Bank, has concluded the development of working prototypes of a common platform for multiple currencies central bank digital devices (CBDC). The success of the Dunbar project is also essential for India’s own CBDC project – the digital rupee.
IIRD’s vision and mission would be to develop regulatory standards and benchmarks for emerging markets and
, facilitating and improving cross-regulatory coordination and information sharing; assess collective risks resulting globally and locally from excessive leverage, poor valuation, inadequate liquidity and create a forum for public consultation, development of international regulations and enhancement of public participation emerging economies.
IIRD could be funded by a combination of public, private and multilateral resources, hosted in India and populated by exceptional talent from India and around the world. It will deploy technology itself, including regulatory technology (RegTech) and supervisory technology (SupTech) and the best technology for training, skills, data sharing and dissemination. Through its G20 presidency, India could become an architect of the reshaped and evolved regulatory paradigm that is equipped to tackle intractable global challenges.
(Mehta is President, . Roy is Partner, Finance and Public Policy, Cyril Amarchand Mangaldas)